There is much talk about changing the permanent fund. The governor characterizes this change as modernization. The trustees' angle was that these changes make the fund safer. I would not characterize either as accurate.
What is the difference between what we have now, which I will call the "trust model," and percent of market value (POMV) endowment model, which is described as "modern?" The endowment model existed way back in 1976 when Alaska voters created the Alaska Permanent Fund. Why didn't we choose it then? Because it is an inferior model for protecting the assets.
The primary objective of the Alaska voter when creating the Alaska Permanent Fund was to protect the asset. Oil is a nonrenewable resource, and the asset (oil) belongs to all current and future generations.
Endowments protect cash flow for spending. Endowments are not created to protect assets. Trusts protect assets. Good, consistent investment management ensures cash flow from trusts.
What we have now protects that portion of the fund we call principal. It cannot be spent without a change to the Alaska Constitution. We Alaskans have saved up over $28 billion, and there is no reason anyone should ever get into the fund. The fund will earn over $4 billion this fiscal year using the Governmental Accounting Standards Board (GASB) standard trustees, legislators and this administration refuse to use.
Legislators, go home; we look forward to your visit next year. In the interim, think about changing POMV to POOOMV, for percent of our oil market value.
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